Understanding the Panama Papers

The Panama Papers are a set of leaked documents regarding the life and times and all-round activity of law firm Mossack Fonseca. While not operating only out of Panama, its Panama office offers services relating to creating shell companies in offshore “havens,” which serve as hubs for offshore financial activities. Offshore banking is not illegal, and is sometimes used to protect money from theft from not-exactly-legal groups – particularly in Russia and Ukraine, where it is used to get around hard currency restrictions as well, leading to a large number of legitimate businesspeople holding offshore accounts. In some sense it could be compared to some peer-to-peer file sharing, which enables an easy exchange of open source material, but is instead known for its infamous ties to piracy.

However, many offshore-based activities, such as tax evasion are key aiders and abettors to the diseases that plague effective democracy. Corruption and a top heavy economic system can both be traced to offshore activities and tax evasion. And this governmental malaise isn’t one restricted to lower level officials trying to hold on to their salaries using the government as a cover, but involves around a dozen current or former world leaders. Most notably is the paper trail leading to Vladimir Putin’s close friend, Sergei Roldugin, with the pot of gold at the end of this dodgy rainbow amounting to nearly 2 billion dollars. Nawaz Sharif’s children used accounts purchase property in the UK. The biggest effect has come from Iceland, where a large-scale popular protest has forced former Prime Minister Sigmundur Davíð Gunnlaugsson to resign.

There is something unreal and fictional about the “Panama Papers” leak. In an alternate reality, it might have served as an episode in an Aaron Sorkin TV drama, or as the backdrop to a racy thriller novel. Sadly, it has come to pass that we need to resort to such Hollywood methods of exposition to show the public where its money is going. The “Panama Papers” have become a catchphrase that threatened to equal the WikiLeaks and Edward Snowden leaks in terms of public outrage – is one of the biggest in history, with around 11.5 million documents in 2.6 terabtyes of data, exposing upwards of 200,000 offshore companies. By these numbers alone, the Panama Papers should have blown the doors open on offshore finance and tax policy reform.
And yet it has been plagued by inaction. The Papers were investigated and vetted by the International Consortium of Investigative Journalists, an independent group that invited several news organisations to work alongside it. This group has been fairly open in voicing its disappointment that there wasn’t as much American involvement as they might have liked, with many major brand-name publication unwilling to help in the process. David Cameron, a supporter of tax reform and offshore finance laws, and embarrassed by the revelation that his own father was involved with evading tax for decades through offshore companies, has proposed a ledger of financial asset information. The problem? All information on this ledger would have to be provided voluntarily. And therein lies the rub; a process that is removing one of the fundamental elements of democratic governance, transparency, is slowly being lost by governments being strong armed by donors and lobbyists. Commentators the world over are applauding the leaks and opining that this could lead to a new era of unprecedented transparency, and yet it seems to only be a victory for investigative journalism, as calls for change are going to be shouted down by those to whom change isn’t viable.